Changes in budget

Bad debt provision escalates in adjustments

THE Enoch Mgijima Local Municipality council adopted an adjusted budget for the 2016-17 financial year of R912.5-million, four months before the end of the financial year, during a special council meeting on Tuesday.

Executive mayor, Lindiwe Gunuza Nkwentsha requested council to give chief financial officer, Nomthandazo Ntshanga the power to present the adjustment budget on her behalf.

Nthsanga said R787.6-million was for the operating budget while R124.9-million had been set aside for the capital budget.

The R787.6-million operational revenue included known grants received for operational expenditure. Operational expenditure was funded from cash carried forward and operating revenues.

She said the capital budget was funded from the municipal infrastructure grant (MIG), internally generated funds, Integrated National Electrification Programme (Inep) and the Chris Hani District Municipality (CHDM). The capital expenditure was R101.1-million in the original budget adopted last August.

“The capital budget has been funded with R53.3-million from own funds, Inep grant of R5-million and rollovers for former Tsolwana and Lukhanji of R8.7-million,” Ntshanga said.

CHDM funding amounted to R4-million but allocation details were not specified. R53.9-million was from the MIG.

“In many cases revenue billed is much higher than cash received. An offsetting bad debt expense is also included for each billed revenue vote.”

The initial bad debt for electricity was R23.5-million, which had increased to R36.5-million after the adjustment, while bad debt on rates had escalated from R22.3-million to R31.8-million. The bad debt related to refuse collection had increased from R17.7-million to R23.2-million.

Provision for bad debt increased from R73-million to R91-million as a result of the negative cash collection for services. Ntshanga said this was consistent with the mid year budget assessment report where there was under collection “in all major services and rates”.

Property rates and refuse collection remained at 6% and electricity at 7.64% for Tsolwana.

In Nkwanca property rates and refuse collection stayed at 7.8% and electricity at 7.64%.

The former Lukhanji area had a property rates increase of 6.8%, electricity at 7.64% and refuse collection at 8%. The Equitable Share allocation from National Treasury remained at R167323.

“This amount includes the allocation made by National Treasury towards the remuneration of ward councillors and support for indigents.”

Ntshanga said the provincial cooperative governance and traditional affairs department had allocated R3-million for staff relocation and integration costs and preparation of Nkwanca’s annual financial statements.

“The restructuring grant increased from R20.143-million received from national government to R23.143-million. Included in the revised budget is an amount of R4-million received for the revitalisation of Tarkastad township under the small town revitalisation programme.”

The operational budget was reduced from R807.9-million to R787.6-million to have a balanced budget, as the original budget had a deficit.

Ntshanga said repairs and maintenance budget had been reduced from R45.7-million to R30.9-million.

“The reason for this is the low expenditure on repairs and maintenance. At December 31 only R5.4-million had been spent for the first six months. Provision of doubtful debts has increased from R73.8-million to R91.3-million. This is in line with poor revenue collection from property rates and major services.”

Legal expenses rocketed by R700 000 as the municipality spent R1.1-million of the available R1.2-million within six months.

The accommodation and catering votes received additional funds.

“The original capital budget of R101.1-million has been increased to R124.9-million, largely due to the approval of the 2015/16 unspent own funds of R17.6-million.”

Indigent income levels were set at R1750 for destitute indigents and R2 540 for indigents.

THE Enoch Mgijima Local Municipality (EMLM) adjustment budget for the remainder of the 2016-17 financial year ending on June 30, has not been welcomed by opposition parties with calls for council not to adopt it.

DA caucus leader Chris de Wet said the municipality was in a huge crisis and cited the establishment of a crisis committee last Tuesday as a sign.

He said the budget was supposed to benefit residents yet there was no money made available in the adjustment budget to deal with the collapsing infrastructure.

“The DA says this is not a budget for a crisis.”

De Wet raised the ire of the ANC councillors when he called the capacity building of councillors nonsense and was not allowed to speak again. He later walked out of the meeting, saying he had no reason to stay if he would not be allowed to speak.

Before speaking, he complained that council speaker Mzoxolo Peter had not noted him to speak despite his hand having been up first.

Peter noted ANC councillors finance head Madoda Papiyane and Mzikabawo Ngesi. Both adopted the budget.

“My hand was up first but you chose people who will adopt the budget before I speak,” he said.

Peter said Papiyane was the head of finance and urged de Wet to get to the point. He said capacity building was an entitlement of councillors.

United Front councillor Aaron Mhlontlo said he supported de Wet.

“I have some clarity-seeking questions on the municipal finances but I will move for the budget not to be adopted. We were told we had R98-million in our reserves ... where is it now? Why are we spending money we don’t have?” he asked before moving that council not adopt the budget.

Peter said a budget was always work in progress and council adopted it.